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tv   Bloomberg Bottom Line  Bloomberg  September 9, 2014 2:00pm-3:01pm EDT

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data live from pier three in san francisco, welcome to "bloomberg west." i am emily chang. we want to welcome you back for special coverage of apple's big announcement, shall we are going "apple's next-generation." tim cook is announced that one more thing, and that one more thing is as much -- is a smart watch. i want to get back to our editor-at-large, cory johnson, at cupertino. eventlmark of the apple
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is when steve jobs announces one tim cook, in recent oneuct announcements, says more thing is indeed the apple watch. have had at least 150 people at cupertino headquarters working on this wearable device, details of which are being announced now. >> back with us, our bloomberg contributing editor and the "wired" deputy editor. we are watching apple play luxurious music as it unveils this watch with a rectangular face, a watch that doesn't look like a watch. >> i really wanted to not want that thing, but it looks really hot. [laughter] i have always said i will not wear a wearable could i will
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wear a real watch. i will try to stick to that as long as i can. >> the real question for a product like this is it that no functionality, would you wear it? this passes the test. >> paul, are you going to wear this thing? >> no, i'm still not there yet. >> oh, such a pessimist. >> i still don't get over the hurdle of what does it do for me that i want to go backwards in time and take a device whose functionality has been absorbed by the cell phone and go back and say "i want that on my wrist again"? i'm not there. >> apple is redesigning a product that has existed for hundreds of years. >> let's take a step back and talk about what a watch is. the onlyt is one of
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permissible arms of jewelry. >> more men wear watches than women. aim thisght they would squarely at women because women wear more wearable devices, but it is the opposite take. it is getting men to wear something that is more form than function. >> first of all, it is beautiful and the aesthetics are absolutely appealing. secondly, a device like a phone is not contracted -- not good for active sports. you have this fitness and health orientation and you need something that is capable of being worn. it. incredibly compelled by apple iswe know that almost never first to market. they did not have the first computer or smartphone or tablet . now we have been redesigning a 100-year-old product.
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does that matter? >> i think it has all the hallmarks. you can see the obvious appeal. it has the hallmarks of a category that apple would like to reinvent. we talked about the reinventing television for this reason -- not a 100-year-old category, but something that is stale and lacking innovation. a watch has those characteristics and you can see why it makes sense to apple. having said all of those things, it is also a device that looks like much of the most important functionality has been pulled into other devices, with the exception of interesting health and fitness cases that do not represent the kind of market that will at materially to apple's online. line.'s bottom >> it looks nice but will it change the way we behave? i think what paul said is
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really accurate. this is more of an ecosystem that standalone device. will it change apple's business? probably no. you could add a business the size of jawbone and it would not change apple. they create a bigger -- a lot of people were watches. >> this could be massive because new value propositions. you are going to do on your e-mail and all work in this mode and this is basically the new phone. it is the smallest device that allows you to be functional at that. you will wear your watch 24 hours a day and it is always with you. >> cory johnson, do you want to wear this? .> i don't know
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i am pretty festooned with my gadgets as it is. >> i know you are. >> i regularly wear a monitor on my wrist, i got the job on up that monitors might axis -- the up thatt -- jawbone monitors my exercise activity. one wonders of apple will look for devices that are not so global that everyone will want to have them. the smartphone is already that. it is only for the most wealthy people in society, global society. that is a big market. when apple looks at this -- i saw dr. oz earlier and health care companies around as well. they look at is not just as a way to tell time and make phone calls, but away to brisbane in this growing market of monitoring -- away to participate in this growing market monitoring health.
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people monitoring the health in a society where technology can help provide information to the medical professional so that the technology is much more incorporated into the life with the phone, with the tablet and yes, with this wearable. >> now that we know that the watch has been unveiled, we don't know yet how it is going to cost. paul, now that we know that this thing is happening, why do you need to watch if you have a phone that could -- that good? the argument -- i am making this up as i go along so feel free to me -- feel free to stop me -- apple sees that consumers are moving to larger and larger devices, these larger and larger phones are becoming cumbersome, it even if they are thinner and curved and nothing else. there is migration of market in terms of form factors and a whole at the bottom of the market where you used to have to flip phones and smaller devices for making calls entering text
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-- and doing texting. they are creating a hole in the market with consumer behavior moving upmarket. there's the argument as to why you might have this on your wrist. >> what companies should be wary. companiesvesting in that are trying to develop these devices or make watches of the room. >> i don't think any company should be worried. but i do think that this product is going to be attractive and maybe the google android world should be worried because now they are to sing together your ipad, your mac, your phone, and your device, there's going to be an incredible ecosystem and you will feel naked if some of the medication -- some of the communication does not go from point one to point to. you will feel that if your
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friends are not on the same ecosystem. corresponds -- >> they are done -- >> the weighted corresponds to businesses -- if you think about the way the businesses might be using ipad, you have the payment information and you have this complete ecosystem that is much more involved and much more tightly incorporated. so in payments, throwing health was throwing mobile -- throw in payments, throwing health, throwing mobile, it is a much tighter system if it takes all. all.ank you we want more with you later in the show. coming up, what hurdles did apple overcome to design the iphone 6? bigger and center, not necessarily better.
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we discussed. ♪
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>> i am emily chang and this is "bloomberg west" on bloomberg television. iphoness unveiled 2 new and a watch. we're back with the former head of the rhode island school of design. you have gotten a look at the watch. it doesn't look like a watch. the cannula face, interchangeable band -- rectangular face, interchangeable bands. >> it looks very nice. the watch will not just be a watch, it will be something else. >> fashion statement in terms of it is not functional? >> in terms of "what are you wearing?" a conversation piece.
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>> do you see people buying it? >> oh, definitely. different iphone doesn't excite us. . new platform excites us even count all the engineers in the region to go after it. >> should we buy the first one or wait? >> we all love apple. why not? >> it has a touchscreen, you can track your heart rate, input-output mechanism. how difficult is that to create? >> i think those parts are easier than the knob. we are going to touch it differently. we are so used to swiping that knob. probably feels really good. >> should we be calling this thing the ives watch? does it have his fingerprints on
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it? >> the key thing to remember about johnny's that he is a great design leader so he will always credit his team. >> and they brought in an independent designer and you know him. >> yeah, total alien, the best kind. >> in what way? >> true on car of industrial rde of -- true avant ga industrial design. he makes things you don't get government -- he makes things you don't get to ever make. >> how do you expect a guy like him to influence apple, influence the products they are making? anything, design is not the spirit of creativity and he is a human torch of funny, interesting forms.
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the team is excited to have him on board. >> they also brought in angela erin's running the retail side. do you see an emphasis on the statement that products made, as opposed to what they can do? >> it has always been that way. think about why we wanted to buy apple. we believe in steve jobs. >> is about the best product or is it about the religion? >> the best product as part quality, part reception. restaurant because of someone told me is great, it is great. >> is apple the best? >> it is the best right now. >> at what? >> at making us feel something about technology but others are coming up. >> does the samsung have a chance of unseating apple? >> oh, definitely. everyone is out there.
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a tough playing field. approachs jony ives' to design? >> i had pizza with him once. it was really fun. what struck me most is as icn or great designers who have done things that scale, they are good leaders. the first thing they say is "i am so proud of my team." >> how special is he, though? >> i think he was especially special because you worked with steve jobs closely. that relationship as part of what makes him amazing. >> without steve, how does the creativity and inspiration continue? rs" ands like "star wa the force. the force is in him. he is passing it on to others. >> stay with us.
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or, next. ♪
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>> welcome back to "bloomberg west." chang.ily this is a special edition, "apple's next-generation." we are talking about apple design and the future of the. we are getting more details about the watch. it must be used with an iphone. >> also a good marketing phrase. wow, special. >> do you think it is special? >> is like having glitter or not. it is a different level experience. the software will make you feel better.
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>> steve jobs is famous for saying "don't give them what they want, tell them what they want." >> it is something to make you feel better yourself. >> what do you think about the bigger phone? >> well, they're bigger, so we think they're better. the bigger the things get, the sloppier we get on the software end. that is why i like the watch platform. it is smaller and harder to design for. >> how do they handle that for the software perspective? >> not easy. you have 2 camps, like the "star wars" and the "star trek" people. [laughter] >> doesn't require a different approach? >> if you try to make it do too
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much, you will hate it that you have to find the sweet spots of both platforms. >> what do you think of the apple design without steve jobs? the last couple years, how impressed have you been? >> depends on how you look at the design. ity's expertise has pushed far. if you look at the software design, and has gotten old. ump.ave not seen a big j >> what do they need to do? >> re-think software. >> how do they do that? >> new language. the more we change the material the more we can design better for it. >> i keep calling it the iwatch -- it is just the watch -- it includes notifications the p -- that fine print. -- that vibrate.
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can they continue that without steve jobs? i know i keep asking this but now we see more evidence of what it looks like. >> we forget that steve jobs is in all of us now. >> that is so meta. steve jobs is in all of us now. >> people are making software all over the world and their inspired by him and we will make software for this. the first one that comes up a lot of people won't like but people will make better software for us. >> who do you see in the android world that has the best chance of giving apple a run for its money? >> all of them do, whether it is the chinese are the ones here. people are putting money into beating apple. >> what is apple stand to lose? ethos, steve jobs
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liberal arts and use of technology. theyere are things that wouldn't have been, mcgregor phones or smaller tablets. >> one thing is you never know. >> the watch works with siri. you try a lot of different watches. you where a misfit sometimes. >> sure do. >> what does this watch you to accomplish? >> in needs to do something that this watch doesn't give me. i don't know how they do that. >> you see that is different rather than, memory -- rather than complementary? >> both. we talk about this health tracking thing, but who knows? >> i wonder if it is just making things easier. checking the time and the weather. >> depends on your age.
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if you are a kid, you don't need a phone anymore. it messages you all the time. we may be annoyed by it but -- >> how many people are going to buy this watch? is this an entirely new market? >> oh, all the apple fans. >> the people who don't wear a watch, will they buy this thing? >> people didn't buy the first iphone, two. >> beyond early adopters, do you think there will be more? we don't know the price yet, i should add. it looks that it is going to be racy. >> it will open the door. we have order of the -- we are bored of the phone. former head of
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the rhode island school of design, thank you for joining us. up next, we will hear from jim cook himself -- tim cook himself about the watch. ♪
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>> you are watching "bloomberg west," where we focus on innovation, technology, and the future of business. i am emily chang. "apple's special show, next generation." the apple watch, the iphone 6, the iphone 6 plus, and apple pay. here is the ceo tim cook from today. >> apple watches the most personal device we have ever created. we set out to make the best watch in the world, one that is
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precise. it is synchronized with the universal time standard and is accurate within plus minus 50 milliseconds. it is incredibly customizable, so you can find one that reflects your personal style and taste. it, we invented new, intimate ways to connect and communicate directly from your wrist. and it works seamlessly with iphone. and it is also a comprehensive health and fitness device. watch took very deep to an out of this came some truly remarkable innovation. one of those was the user interface. , with everyout
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revolutionary product that apple has created, a breakthrough in user interface was required. mac, we introduced the mouse to make navigation so simple on the personal computer. on the ipodel allowed users to scroll through thousands of songs in the palm of their hand. and with iphone, multi-touch gave us the ability to interact with a beautiful canvas of photos or videos or music, or all of the information we use everyday. the apple watch require the same kind of careful, deliberate consideration. but we didn't do was take the
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iphone and shrink the user interface and strap it on your wrist. the display is too small. it would be a terrible cost wi -- terrible customer experience. pinch take a gesture like to zoom -- [laughter] it obstructs the content. it just doesn't work. we placed extra functionality in a mechanism that has been on the watch for decades. it is this dial. it is called a crown. on the apple watch it is probably digital crown. -- it is called the digital crown. thats infrared ied's translate river movement into digital data. you don't need to understand all that. [laughter] but it is a simple and elegant and amazing input and navigation device.
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crown,u turn the digital it zooms in and out. list, you cana scroll through the list, and you can do all of this without locking the screen. if you are in an app, like the thek app, if you press digital crown, it returns to the home screen just as you would expect it to. [applause] apple watch, of course, is made to be worn. he can be worn all day for any occasion. it is as much about personal technology as it is style and taste. it seamlessly combines materials .f software and technology
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and we have to not only of the -- we have thought not only of the function, but of the way it looked. apple watch has been an amazing and rich design story, and we prepared a video of that this jony ives there is no one better to tell the story than jony -- >> so how does apple balance the need for innovative design and innovative function in a new products like the apple watch? me, keith lavoie, and cory johnson, who is at the .vent at cupertino honeywell is creating apps for this watch, bmw to help you locate your car, starwood hotels. lot of functional
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things like checking into your hotel room, finding your car, that are painful, and people are going to be wearing the device with that locates them all day long, you might as well build a new app for that. these partners are already building suggests that there is an ecosystem there. cory, as a gadget lover, how good can all this stuff be on a small screen? looks like they're getting a lot in there on a very small screen. >> it is interesting the way the state might work. i am struck by the fact that they have so much variety going into this. steve jobs brought back his company when he returned for back to with the idea of products and the vacation. this is a lot of complexity, a lot of styles. you see the influence of the burberry executives who came in
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from the idea that there will be different watches for different use cases and lots of them. one of the things that does that will be challenging for a company that can go in and out of fashion with such speed and unpredictability is inventory risk. it is one of the untold problems that apple never faced in the course of the last 15 years, big, ballooning inventory of expensive, obsoleting stuff. technology rocks like fruit. -- technology rots like fruit. having afortunate, by limited product line, they have not had died technology on the dead technology on the shelf. it is a whole the risk to the company but interesting choices they're making along the way. havinge is famous for one of a smartphone, one of the tablet. now we are in a completely
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different world with multiple smartphones and multiple tablet. they're coming out with something bigger soon. here we are with a watch that could go in and out of fashion. >> i think that is true, but the customizable nature -- the devices get smaller, cheaper, differentive -- i.e. colors like you saw with the ipods over the years. they will continue to expand from there. this will be a hot product. videos,at the demos and i think this is addictive once people get their hands on it. >> what does it mean to the companies that you invest in? >> you can assume that people will be wearing an device capturing their presence all day long. even a phone isn't truly with you all day long. this device may be with you all day long -- when you are in the gym, when you are going biking, when you're sleeping.
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plus, there is a new sensors. there is a heart rate sensor and several other sensors that are custom-designed for this. the data may be what is important and credible -- critical to unlocking applications. sensors and doors in hotels -- you can start unlocking those doors. the entire landscape may shift if everybody is wearing a functional device. >> cori, you will be happy to know that it tracks on the movement, heart rate, distance, travel, and has a dedicated workout app. a i can see myself logging lot of mileage with that. but there is a fashion concern as well. interesting that the younger generation just doesn't wear watches. you mentioned women, but watches skew older men. i talked to people from time to ask and they said that what sizes, the watches are getting
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bigger and bigger, suggesting that it is more jewelry. this is the kind of device, as keith was just referencing, that to get the functionality, it requires it to go 24/7. that is another risk introduced in this successful launch of a product. johnson, editor at large of the ongoing apple event in cupertino. the former ceo of square is still with us. we will be back with non-apple news after this quick break. ♪
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>> welcome back to "bloomberg west." i am emily chang. we have been covering the apple event in cupertino. the company has unveiled 2 new pay, and apple
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watch. maybe you don't even have to take your phone out of your pocket today at the register. apple has partnered with a number of different retailers as well as active developers. for more on things that are happening outside the world of apple, i want to get to trish regan, who spoke to legendary investor carl icahn. >> of course we had to talk about apple. we are not entirely outside the world of apple right now. is the largest noninstitutional investor and made an investment about a year ago in apple, and he tweeted that out and he insisted to me when we spoke that he has not sold one single time.of apple in that he said "look, i've seen it go from 400 to roughly 700," and "i am happy that we are adding to our position. date, i've wrestled the
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shares since i tweeted about a year ago -- i have not sold a share since i tweeted about it a year ago." today,the announcement carl had a very interesting view on this. everybody gets so excited about all these products, there is this and that, and he said, open boat at the end of the day -- "at the end of the day, i am all about the numbers. where else can you get a gross company at 10 times earnings? i look at the math and the numbers speak for themselves." mostis not necessarily the tech savvy, and you the latest transit -- into a latest transit technology kind of guy. but he is into numbers and making money and he just thinks this is a company that has a proposalod evaluation for it. he pointed out that it has its
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entire ecosystem around it. and in some ways it is like an oligopoly. "another reason i am attracted to the company." >> i did wonder about those conversations with tim cook. they do have quite a past. >> he was pushing for those buybacks. carl'sk had dinner at house. a somewhat unusual move, for the ceo to be entertained by carl and take that meeting. but eventually carl's pressuring of cook and other institutional investors pressuring seem to have some effect because they thought the buybacks but when i asked him what he thought of tim cook today, he said "tim cook is a good manager. even though i had to push them on the way back he is doing a good job."
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it well but he does appreciate that the by fact it happened. we will have a law more on all smart" in "street about 15 minutes from now so i will see you there and we will look at how the stock is reacting as he headed to the close of trading. smart"h regan on "street later today. tim cook knows how to pick good entertainment because u2 is on stage in cupertino right now. i want to look at other companies that are being impacted by today's news from apple. julie hyman has more on that. jules? >> you look at the various companies that supply apple with components of the devices. there are so many of them. the companies that are most reliant on apple or the following -- the dialog semiconductor, tased tech it alls, blue mobile
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opposed to around 50% or more of their revenue from apple. many of them don't trade in the u.s. mobile is trading down today. that is true of other companies that supply apple with components. there's a company called gt advanced technologies. we heard alix steel talk a lot about this. this is a sapphire producer. we suspected that there was a partnership here. atre may be disappointment the sapphire appears to be used in the watch and not in the new generation of the iphone. the stock is already for the year to date. we are looking at universal display, another company that supplies. it is down today, however. there are a few stocks that are up and it is not clear what the connection is. this company is developing
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wireless charging but it is not clear that there is wireless charging here, but that stock is up to date. immersion is developing touch analogy. that stock is higher today. , a watchthat are lower company -- is there concern on the part of investors that people are going to buy the apple watch and not other types of watches? that seems to be reflected in what these stocks are doing. .> thank you so much, julie will consumers flocked to apple stores to buy these new devices? final thoughts from apple's big unveiling when "bloomberg west" returns. ♪
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>> welcome back to "bloomberg
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west." i am emily chang. will apple's new products be the massive hits the company is hoping for? and how did you get compared to previous years? ,oining me for final thoughts the former head of square studios, and at the event in cupertino, editor-at-large cory johnson, and our bloomberg contributing editor paul kedrosky. what stands out most about today? statewill reshape the end that lasted for several different industries. all these models have been waiting for intending announcements and now people can start predicting the future and develop for that. this will allow for the evolution to finally start and we will see where it takes us. >> how big a deal is it that you don't have to pull your phone out of your pocket -- >> potentially how apple pay
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works could be compelling. if you just have to waive your wrist, that is arguably better than swiping a credit card. -- if after i finish a you have to authenticate to watch while you are doing this, that would destroy it. but with the fingerprint sensor on the phone, that is pretty unique and that would transform payments. >> we have to see how this works in practice. >> and also how it works with e-commerce sites that how does it integrate with those sites? depending on how clever and innovative they are, that could be a really big deal. an incredible breakthrough if that is possible. >> paul kedrosky, how about you -- as u2 plays out the event in cupertino, what are the standout things apple announced today? >> teeth nailed most of the
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outside once. apple from the business standpoint -- cory touched on this earlier but i will reinforce it and take it forward. the model is changing in important ways. they're getting away from products that have been most successful and that manage the supply chain effectively. and there are approachable issues with respect to inventory management and how you track those and create real risk in your supply chain. still on the fence with respect to the watch product. i just think that the history is so much of a general purpose devices that you have a real uphill challenge ahead, not least because there's an entire demographic that has abandoned his device altogether. -- have is an deep landscape empty landscape of people who don't see why they would have something on the wrist in the first place.
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but this will be the biggest upgrade cycle apple has seen in the history. >> apple is really playing up this u2 thing. they give everybody a new u2 album free. cory, what does apple have to worry about? >> the shrinking growth potential for the smartphone business. we're are not talking about it much, but the iphone 5c as a free device -- it was only a year ago that we were talking about thne oe to go down market and have a phone available for other markets, third world markets and so on. now that they have a device in the u.s. that will be offered for free, that is a powerful thing for them to widen their potential audience and make things like payments matter to a bigger audience. paul is talking about the mother of all upgrade cycles. 150 million units in the last fiscal year, and if you have an enormous number of iphone users who don't want to switch brands
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available to do upgrades on their plans, carriers want to keep them on the plans. a lot of switching happening next to the chaos introduced by t-mobile's new plan. here withphones sold slightly better cameras and battery life and the iphone 6 plus much under battery life. -- much better battery life. for a certain kind of user that is a big deal. we don't know how it will play out but that is, to be -- that is what innovation is about. arguably the most successful product ever with the iphone in consumer products. we will see how this plays out in the marketplace overtime. u2 have given this new album to all iphone users for free. the edge and bono are on stage with tim cook. keith, what do you think apple's
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biggest challenges are going forward? >> they will need to make as much more functional, lighter weight, cheaper over time. remember the first iphone -- the capabilities they asked today are 4x in terms of speed. the first draft is never perfect. this will be an interesting evolution because of the constraints are very severe. to improve the battery life, to improve performance, to reduce the size and cost is pushing -- it is rocket science engineering, rocket science logistics. not easy to do, but they were successful with the ipod and the iphone and even the ipad has reduced to giving them in terms of weight and increased its performance. >> what about phones, paul? the smart watch market is wide open, but phones are so competitive. >> phones are so competitive.
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but as evidenced by people's behavior, there is huge demand to upgrade to these larger fonts. overcan't do it over and but this time they did it in terms of what they have to do to drive the upgrade cycle. with the watchful eye don't think they ever said with the battery life was. that seems like a major miss. >> that and other details we will have to see when it comes out and i'm sure things will be leaked out along the way. paul kedrosky, bloomberg contributing editor, cory johnson, editor-at-large. the event has officially ended and our coverage ends now. keep watching bloomberg television and get the latest headlines on your phone, tablet,, and bloomberg radio. ♪
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>> welcome to the most important hour of the session. we still have stocks in negative territory. investors are also placing a few bets on apple. street smart starts now. is tim cook's apple. the company is overhauling its


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